Property Sector Most Popular Diversification Strategy
for UK Pension Funds

March 26, 2007 (PLANSPONSOR.com) - Thirty percent of
UK pension funds reallocated more than 5% of their investment
portfolio in 2006, with the property sector coming out as the
most popular way for funds to diversify their assets,
according to research by Aon Consulting.

The research showed that these funds were seeking
greater portfolio diversity and risk-controlled investment
strategies, with 14% of the 150 companies surveyed opting
to diversify over the past year to avoid being exposed to a
single volatile asset class, according to a
press release
on the survey. Half of UK schemes
studied by Aon diversified their growth assets using
property, 17% used hedge funds and 11% used global tactical
asset allocation.

Other findings by Aon include:

11% of employers say their schemes have adopted some
form of Liability Driven Investment (LDI) strategy over
the past 12 months.

17% of schemes are using contingent assets for scheme
funding with another 20% considering using such
assets.

Parent companies and/or group guarantees are the most
popular form of contingent funding being implemented
(17%) or considered (20%), with escrow accounts (1%/
19%), charge over assets (2%/ 14%) and letters of credit
(2%/12%) being the next most popular considerations.

“While such assets do not generally remove risk from the
employer, they can help to manage the volatility and should
make trustees more relaxed about any short-term investment
underperformance,” said Paul McGlone, principal and senior
actuary at Aon, said in a news release.